Strategic Sourcing Introduction Fiscal Challenge for current year and beyond requires cost reductions Strategic Sourcing –Sustaining New Synergies Task Force Initiative Purdue engaged Huron Consulting Group to conduct an overall assessment of procurement to pay operations and to help Purdue develop a Strategic Sourcing Master Plan Implemented new organizational structure

Strategic Sourcing Overview Carol Conner, Business Process Manager Denny Feldman, Manager, Strategic Sourcing

Strategic Sourcing What is Strategic Sourcing? Strategic sourcing is a procurement process that continuously improves and re-evaluates the purchasing activities of an organization.

Strategic Sourcing Strategic Sourcing Primary Objectives Reduce the costs of goods and services Capture resulting savings Create contractual alliances with suppliers to support the long-term goals of the University Maintain and improve product quality Improve business functions Optimize the total purchasing process

Strategic Sourcing In-Scope: Purchases that are expected to be made in competitive markets where multiple vendors are present or negotiable purchasing opportunities exist for the University. The Strategic Sourcing Master Plan identified 22 different in-scope commodities with a total annual spend of approximately $172 million in FY 09-10. Out-of-Scope: Insurance and benefits, travel and employee travel expense reimbursement, sponsored research subcontracts, utilities (excluding data and voice), and construction.

Strategic Sourcing

Strategic Sourcing Approach for prioritizing commodities or categories within a commodity

Strategic Sourcing Total $172M Strategic Sourcing Master Plan FY 09-10 Commodity Savings Opportunity and Implementation Complexity Total $172M FY 09-10 annual spend for 22 commodities

Strategic Sourcing Initial Quick Win Categories IT Peripherals Removal of CDWG catalog Goal to reduce/eliminate spending via newegg.com, amazon.com, Best Buy, etc. which represents $1.3M of $4.3M total annual spend. Desktop/Laptop Dell and HP agreements; leveraged entire campus Custodial Supplies HP Products, Kimberly Clark Free shipping

Strategic Sourcing Initial Quick Win Categories (cont.) Office Related Products Deeper discount and broader discount base Copiers and Printer Analysis showed 10 different manufacturers with over 150 different models on campus 350 machines leased/rented; lease rate range 14% to 24%. Internal loan Right Sizing

Strategic Sourcing Additional Executed Categories and Annual Spend Computer Hardware Server Maintenance – $284K Changed vendor; leveraged entire campus Janitorial Supplies (Trash bags) – $290K Showcase Supplier identified in BOILERMART Renegotiated Cannon IV agreement for ITaP and Libraries labs – $645K Benchmark data used to renegotiate 40% savings

Strategic Sourcing Current Category Initiatives and Annual Spend Computer Hardware Server (Purchase) – $4.5M Cylinder Gasses – $374K Audio Visual – $1.5M Plumbing – $2M Electrical – $1.8M Renegotiating HP Janitorial Supplies Agreement – $640K Scientific Supplies – $7.7M Outside Printing Services – $2.8M Medical Products and Services – $8.5M

Strategic Sourcing Seven Steps of Strategic Sourcing Analysis Develop Commodity Team Sourcing Strategy Identify & Prequalify Suppliers Supplier Selection & Contracting Integrate Suppliers Monitor & Follow-Up

Strategic Sourcing Strategic Sourcing 2011 Operating Plan

Strategic Sourcing Visit web site for commodity updates: www.purdue.edu/purchasing/Sourcing For more information or to schedule a unit meeting contact: Denny Feldman, Manager, Strategic Sourcing Email: dkfeldman@purdue.edu Phone: 765 49-41856

Strategic Sourcing Path Forward Procurement Organization Commodity Groups Procurement Council Your Role